1. Money makes the world... Wisconsin’s fiscal challenge About a lot more than budgets. | 10.04.10

2. ■ WISTAX: teaching, informing... angering ■ State economy drives all ■ State finances then and now ■ No help from the outside? Overview

3. Economy Revenues Budgets Choices “It’s the economy, stupid..” - Campaign ‘92

4. The economy drives all.

5. Per Capita Personal Inc.: Wis. +/- US > US < US Economy recapped in one slide

6. How did we manage in the 90s? % Women working

7. Mfg. Jobs 6/07-6/10 WI-14.8%-75K US-16.1-2,246K Tot. Nonfarm 6/07-6/10 WI- 6.0%- 173K US- 5.3-7,236K Closer look at the economy... jobs

8. Avg. Earnings/Worker & GDP/Worker ( WI % US) Productivity: GDP/Worker Avg. Earnings/Job... wages and productivity

9. Real wages growing, but slower WI US

10. Where are our jobs? 1990-2009

11. Where aren’t our jobs? 1990-2009 U.S.Wis. E/I

12. Pct. Change in No’s of Private Establishments Third Quarter of Ea. Yr. Shown (BLS) > v How are employers doing?

13. Are we creating new firms?

14. New firms... where? < > 1994-2009

15. Wis. % of US GDP A marketing view... share

16. GDP % chg GDP pc Strategic view... market position

17. State finances, then and now

18. Wis. Fin. Stmts ($b), GAAP - $2.71 billion Other states? State finances in context (GAAP)

19. Prepared for recession? (NASBO) ■ Surpluses % spdg.20082009 ▪ Wisc vs. avg.1.0% vs. 8.60.7% vs. 4.7 ▪ States > WI4941 ■ Spending % inc.20102011 ▪ Wisc. (pre-lapse)+5.3%+5.2 ▪ 50-state avg.-6.8%+3.8% 43 cut22 < +2% ■ 2010-11 tax increases ▪ Only five states > in raw amt. (inc. CA, NY)

20. 2009-11 Budget decisions made, 2009-11 +1.5 +11.1

21. 2,511+ 200 11 rev (+ 12) Budget decisions postponed 1,232+200 Long history of structural imbalances.

22. “ … the pace of the recovery is expected to slow and will not return to pre-recession levels until 2013...” − DOR, 8.20.10 Projected growth in personal income CYWI-MayWI-AugUS-Aug ’10 3.0%2.5%3.2% ’11 4.64.44.7 ’12 4.44.34.8 ’13 4.44.14.8 Why this matters. Recovery dividend?

23. Structural deficits + slow growth = ■ GPR tax revenues (2010-11) $12.88 billion ■ Pers. income growth: 4.5% / yr. ■ 12.9 x 4.5% = $520 million 520 + (520 + 520) ■ Structural ‘deficit’ ~ $1.23b + $200m = $1.4b

24. Medicaid: ’98: 1/13 ’08: 1/5 MA deficits, fed help? Options narrowed?

25. ■ Corporate income e.g. comb. reporting, throwback ■ Individual income Top rate up, cap. gains news Credits, but small, odd ‘mix’ ■ Tobacco (but...) PS: $3.0 billion new taxes/fees 2008-09-10-11 Low-hanging fruit picked?

26. How Wisconsin Taxes Compare Nationally Revenues as Pct. of Pers’l Income; FY 08: US Census And, by the way...

27. Political reality: (electorate and elected) ■ Public mood ~70% state gov’t fair/poor job ~60% state priorities: jobs/econ. + tax/spend no others >~10% ■ Political dysfunction: ▪ 10-15 years of fiscal denial (R and D) ▪ careerism + power + special interest allies ▪ protect status quo; major policy changes? ▪ Wisconsin leader?

28. Possibilities and implications ■ Pendulum: 3D to at least 1R, perhaps 2R?? ■ Polls: governor; modeling: legislature ■ Split governance: the good and the bad ■ Issue approaches? ─ K-12 education (kids/unions vs. tax relief) ─ Medicaid ─ Higher education ─ Prisons

29. Does legislative make-up matter?

30. Now help from elsewhere

31. ■ “... US government debt held by the public has grown rapidly... it is now higher than it has ever been except during... World War II.” ■ “... deficits will cause debt to rise to unsupportable levels.” ▪ Crowding out of private savings/investment ▪ Rising interest costs forcing program cuts ▪ Higher marginal tax rates “would discourage work and saving and further reduce output” There is no rich Uncle (CBO, 7.27.10)

32. *The alternative fiscal scenario deviates from CBO’s baseline projections, beginning in 2010, by incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past... And he’s in denial CBO June 09 US GDP Federal Debt Held by the Public Under CBO’s Long-Term Budget Scenarios (Pct. GDP)

33. Your turn The Wisconsin Taxpayers Alliance Our eighth decade of teaching and informing the press and public about how their government works, taxes, and spends. Thank you for making our nonpartisan research and citizen education possible. www.wistax.org